Evergrande Creditors Demand Further Explanation For Billions In Seized Cash
Kanebridge News
Share Button

Evergrande Creditors Demand Further Explanation For Billions In Seized Cash

A group of foreign creditors to China Evergrande Group is asking the company for more information related to the seizure of 2.8 billion of cash at its property services arm.

By ALEXANDER SAEEDY
Thu, Jul 28, 2022 12:04pmGrey Clock 3 min

A group of offshore creditors to China Evergrande Group are demanding additional information about the seizure of nearly $2.8 billion by local banks that could explain how the troubled property developer pledged the funds without investors’ knowledge, according to people familiar with the matter.

Last Friday, Evergrande released the preliminary results of an investigation into the missing funds pledged as security for loans by an offshore subsidiary that manages Evergrande-built properties. Evergrande also announced last week that it ousted its longstanding chief executive officer, Xia Haijun, and its finance chief, Pan Darong, over their involvement in the arrangements, as well as four executives from Evergrande and its subsidiary.

However, some creditors don’t believe that the company sufficiently explained how the funds were guaranteed to banks without any form of disclosure to investors, and they haven’t received any explanation beyond what the company has said publicly about the seized cash, people familiar with the matter said.

This week, a group of Evergrande’s largest offshore creditors, which own secured debt backed by assets at the subsidiary, wrote to the company requesting additional information on which executives were directly responsible for the pledges, which banks enforced their claims on the assets and how the company specifically plans to compensate them for the lost funds, which represent most of the subsidiary’s cash, the people said.

The continuing tension between Evergrande and its foreign creditors highlights how Evergrande has struggled to meet investors’ demands for transparency nearly eight months since it defaulted on its foreign debts and just days before the anticipated release of a restructuring plan the company promised to deliver by the end of this month.

Evergrande and advisers to the company’s offshore creditors didn’t return requests seeking comment.

Last week, Evergrande published preliminary details related to its investigation of 13.4 billion yuan (about $2.8 billion) in cash pledges at its Hong Kong-listed property management unit, Evergrande Property Services Group Ltd., which guaranteed third-party borrowings diverted to the parent company.

Banks later seized the funds, which were used to help finance the parent company’s general operations from late 2020 until the end of 2021, when the third-party borrower failed to repay the debt, according to the report.

The seized funds constitute more than 90% of the property service arm’s 14.03 billion yuan cash holdings as of June 30, 2021, according to the subsidiary’s interim statement.

“It seems to me that Evergrande has leveraged the majority of cash in the service arm to feed the parent company,” said Iris Chen, a credit analyst at Nomura International Hong Kong Ltd.

“Given that the service arm is a key asset that is directly held by the parent group, the misuse of cash will hurt the valuation of the service arm and therefore impact the recovery value of the parent company’s offshore bonds,” she said.

Analysts and investors said the incident will likely weigh on investors’ ultimate recoveries in a debt restructuring and underscores longstanding transparency concerns raised by Evergrande’s offshore creditors. The company and bondholders have sparred in the past over inadequate disclosures, and foreign bondholders have previously threatened to sue or liquidate the company for failing to engage with them.

“From the disclosure, one can see the poor corporate governance of Evergrande in the past, and the type of off-balance sheet debt arrangement it made, which negatively impacts bondholders’ overall recovery,” said Michel Lowy, co-founder and CEO at SC Lowy, a Hong Kong-based high-yield and distressed-debt manager.

Evergrande, the world’s most indebted developer with more than $500 billion in liabilities, defaulted on its U.S. dollar bonds in December after monthslong liquidity problems, and its Hong Kong-listed shares have been suspended since March.

The company’s debt restructuring is progressing amid a property crisis in China, where crackdowns on excessive borrowings have led to real-estate developer defaults and stalled housing projects. Outraged by long-overdue construction projects, home buyers have threatened to stop mortgage payments on unfinished apartments.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: July 27, 2022.



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Property
Judge Blocks Effort to Auction Graceland
By TALI ARBEL 26/05/2024
Property
Hotel experience at home in Castle Hill
By KANEBRIDGE NEWS 22/05/2024
Property
Why living 80s style would mean we’d need 1.2 million fewer homes
By Bronwyn Allen 21/05/2024
Judge Blocks Effort to Auction Graceland

Family of Elvis Presley was fighting the attempted sale, alleging fraud

By TALI ARBEL
Sun, May 26, 2024 2 min

A Tennessee judge on Wednesday blocked an allegedly fraudulent attempt to auction off Graceland, the former Memphis home of music legend Elvis Presley and a major tourist destination in the state.

Elvis’s granddaughter, actress Riley Keough , says a company that had planned a Thursday sale was fake and trying to defraud the trust that owns Graceland.

Judge JoeDae Jenkins in Chancery Court in Shelby County, Tenn., granted the injunction to stop the auction, according to a court clerk. The court had granted Keough a temporary restraining order on the sale last week.

The auction was initiated by an entity called Naussany Investments & Private Lending. It had filed a public notice for a foreclosure sale in Tennessee, alleging Lisa Marie Presley , Elvis’s only child, defaulted on a $3.8 million loan it made to her. The group said it now owns Graceland because Presley defaulted on the loan.

Presley, Keough’s mother, controlled the Graceland trust until her death in January 2023 . Keough then took over as trustee.

Lawyers for Keough said Naussany’s loan documents are forgeries, and the firm “appears to be a false entity created for the purpose of defrauding” the trust that owns Graceland, Presley’s heirs or any purchaser of Graceland.

Elvis Presley Enterprises, which manages Graceland, has also said Naussany’s claims were fraudulent. “There will be no foreclosure,” said Elvis Presley Enterprises spokeswoman Alicia Dean . “Graceland will continue to operate as it has for the past 42 years.”

Keough’s lawyer declined to comment.

Naussany Investments and Kurt Naussany, named in the complaint as acting on behalf of the entity, couldn’t be reached for comment. A phone number listed in the complaint didn’t work, and emails sent to associated addresses weren’t answered. The Wall Street Journal couldn’t separately find contact information for a Kurt Naussany. A lawyer for the entity couldn’t be identified.

The Graceland complex in Memphis, which includes an exhibition center and a 450-room hotel, attracts hundreds of thousands of visitors annually.

Elvis bought the property in 1957, when he was 22 and an ascendant star. He died in 1977 at the age of 42 and is buried on the Graceland property. Graceland opened to the public in 1982.

Lisa Marie Presley’s mother, Priscilla Presley , reached a settlement in 2023 with Keough over who would control the trust. The settlement came after Priscilla Presley challenged a 2016 amendment to the trust filed by Lisa Marie Presley that removed her mother as trustee.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Money
Metallica’s European Tour Showcases Renewable-Energy Big Rigs—And Their Limits
By PAUL BERGER 24/05/2024
Money
Boost for World Economy as U.S., Eurozone Accelerate in Tandem
By JOSHUA KIRBY 25/05/2024
Money
The fast-approaching ‘silver tsunami’ set to hit the Australian economy
By Bronwyn Allen 23/05/2024
0
    Your Cart
    Your cart is emptyReturn to Shop